Watch the interview with Andy Zain, Managing Partner of Kejora Capital, a VC firm focusing on South East Asian tech companies.
Here, Andy dives deeper into his early insights and shares his strategy that took Kejora Capital from $5m to $600m AUM in 8 years.
He discusses the process of venture building in a developing market and explains why Kejora’s thesis has proven to be so successful.
Read more to get actionable insights from South East Asia’s top performing VC.
On Early Insights
In emerging markets, you cannot be too niche
You must focus on the infrastructure level of the digital economy
When we came into the South East Asian market 8 years ago, it was still an emerging market. What I mean by digital infrastructure is the array of services it takes to launch a product or service.
For example in eCommerce, services such as payments and logistics are a necessity. In the US these services are in ample supply, however, in emerging economies, these areas present a great opportunity for VCs.
We also found that entrepreneurs are typically first-time founders in emerging markets. Though some have started companies in the past, most do not have experience in building and scaling tech companies.
This is why we opted for the focused venture building approach rather than the spray and pray model and why we like to bring in founders into our office. With this approach we can leverage our own experience as entrepreneurs and help the founders directly.
In developed markets, the spray and pray model can work very well, but not in emerging markets. We must contribute to developing the ecosystem. As VCs we are change agents, so we should not take this responsibility lightly.
On Start-Up Fundraising
We give Pre-Series A companies, Post-Series A investment
Fundraising in emerging markets is very inefficient for founders and can take four to five months, forcing them away from their products at a crucial stage.
If the company is raising $1m, we like to offer them $2-3m. At this stage of development in the ecosystem, we like to invest a larger amount than most (in stages with milestones), so the founders can focus on building their company.
This way we deploy our capital much quicker, typically in 1-2 years and focus on a few companies per fund. We use the remaining time to help, mentor and groom our startups.
We’ve found that this formula works very well and our success rate is close to 80%, while we only lost money on 5% of our investments. It’s a great model when the ecosystem and market are in their infancy and though our fund is much bigger now, we still follow this recipe to some degree.
On the South-East Asia Market
We are in the Golden Era in South East Asia
There are opportunities in almost every market, which makes it prime time to be here. The region is also not very saturated. Most of the unicorns have come from a handful of places such as Singapore and there is still a long way to go in places such as Indonesia, Thailand and the Philippines.
There’s a record level of investment coming into S.E Asia, and we utilize our know-how to develop and invest in many first time founders. South-East Asian GDP is at the level of China when it produced companies like Alibaba, Tencent, Baidu and the region produces its own unicorns who have started to IPO.
This region is also incredibly fast in producing unicorns. Typically it takes over twelve years to create a unicorn and IPO. Here we’ve seen them built and exited in as quick as eight years, they can even reach unicorn status in two years.
The region is ready for scaling, and things are moving much faster. We have over 600m population of which 350m has mobile and broadband access, which is larger than the US. Consumers here are able to adopt and consume tech much faster.
On Thesis
Our overarching thesis is hands-on synergy
Focusing on digital infrastructure is our strategy
We have multiple funds with unique segments and theses. We focus on spaces where we are experts and we invest in areas that can provide synergy for the ecosystem we are supporting. This way we can push long-term trends and also have short-term flexibility and agility.
When we launch or back a new business, our larger companies can immediately provide synergistic partnerships whether it’s mentorship or something else. To accomplish this we act as an intermediary between our large portfolio companies and much smaller ones.
We can do this because of our tight-knit relationships and our large stakes in these companies. This is why we choose to work very closely with a few companies. It wouldn’t be possible if our portfolio consisted of hundreds of companies with smaller stakes.
We only focus on areas we understand and where the market is ready. This is why we don’t invest in DeepTech or Crypto. All the talent for these industries is not here so it doesn’t make much sense for us to invest in such areas.